"We believe PetroChina (NYSE:PTR) is now being squeezed. CNOOC (NYSE:CEO) and Sinopec (NYSE:SHI) have been squeezed for dividends given their discretionary payout policy and low gearing. PetroChina bent over backwards to declare a year-end dividend in 2015. Itneeds to find a way to declare an interim dividend for 2016. We believe PetroChina is under tremendous pressure to fund state budgets and this will be the key to unlocking shareholder value.

"The only way, in our view, that PetroChina can declare an H1 interim dividend is to 1) sell assets or 2) change its payout policy. Both, in our view, will unlock value for shareholders by either crystalizing SOTP value or demonstrating a new raison d'être for the SOE."

Crude futures are heading lower after posting the first significant gains for 2016 in the previous session, as the prospect of additional Iranian supply looms over the market with Western sanctions expected to be lifted within days.

China's Sinopec (SNP, SHI) has also purchased its first ever batch of U.S. oil for export, a landmark transaction after the ending of a four-decade ban on domestic exports.

West Texas Intermediate is down 3.4% at $30.13 a barrel, near the 12-year low of $29.93 hit earlier this week.

Sinopec and other state refiners such as PetroChina (NYSE:PTR) are likely to be pleased as long as the crude oil they buy or extract is cheaper than the fixed price of gasoline and diesel they sell, but the potential longer-term problem for the refiners is that the government’s price fix could essentially cap growth in demand for gasoline and diesel.

Fu was considered the driver behind the plan to list the business, Sinopec Marketing Co., in a Hong Kong offering that had been expected to raise $5B-$10B.

A public offering, when it happens, could prove attractive: Sinopec Marketing’s 30K gas stations, 23K of which have convenience stores attached to them, are dotted across China's east and south and account for 60% of the country’s market for oil products for cars.

Sinopec (SNP, SHI) and PetroChina (NYSE:PTR) are dismissing reports that their parent companies could merge to create a state giant, saying they have never received any official information about such a restructuring.

It is the first time Sinopec and PTR have formally downplayed Chinese and foreign media reports in recent months that the government is considering merging Sinopec's parent with China National Petroleum, which controls PTR.

Shares are off earlier highs but still sport strong gains, particularly SHI, up nearly 15% in U.S. trading.

PetroChina (NYSE:PTR) and Sinopec (SNP, SHI), China’s two largest oil explorers, jumped by their daily trading limit in Shanghai on speculation the government is considering consolidating the industry.

PTR jumped 10% to 14.65 yuan, the highest in more than five years, and SNP also surged 10% to 8.56 yuan at the close in Shanghai; in U.S. premarket action, PTR +5%, SNP +5.7%, SHI +17.1%.

A report also said China’s state-assets regulator may cut the number of government-owned enterprises to 40 from 112 through mergers and restructuring.